(Reuters) - The euro slipped from two-month highs on Friday after euro zone finance ministers sought further measures from Greece before signing off on a second bailout, keeping the threat of a chaotic default alive and pressuring risk appetite.
Political parties in Athens struck a long-awaited deal on harsh austerity steps necessary for a second rescue, and a debt swap deal with Greece's private bondholders was practically finalized.
But Eurogroup chairman Jean-Claude Juncker said a further 325 million euros of spending cuts needed to be found and, with Greek elections looming, political assurances were needed that the plan would be implemented.
The common currency was down 0.2 percent on the day at $1.3260, dipping from a two-month high of $1.3322 hit on Thursday. It failed to pierce its 100-day moving average at 1.3330 which has not been breached since late October.
Traders reported a large option expiry at $1.3300 with Asian sellers ahead of there capping rallies.
"Some of our clients remain concerned that the Greek situation could worsen from here. With some event risk still very much out there, people may not be willing to keep sizeable risky positions ahead of this weekend's Greek parliamentary vote," said Valentin Marinov, currency strategist at CitiFX.
Profit-taking was also cited as a reason for the euro's softer tone. The single currency has gained around 5 percent from a 17-month low of $1.2624 hit in January as the market bet Greece would hammer out its second bailout deal with international lenders.
Worries over other highly indebted countries in the euro zone and the threat of recession kept investors wary of buying the currency outright.
"We remain bearish and target a move towards $1.20 for the euro in the medium-term," said Geoff Kendrick, currency strategist at Nomura, who express that view by holding euro put options.
ECB SUPPORT
Lending some support to the common currency were remarks by European Central Bank chief Mario Draghi who flagged tentative economic improvement in the euro area after keeping interest rates on hold Thursday.
Against the yen, the euro was down around 0.2 percent on the day at 103.00, not far off a two-month high hit on Thursday at 103.28 yen. Technical analysts said resistance was at 104.72, the top of the Ichimoku cloud, a closely watched Japanese technical indicator.
The dollar was little changed at 77.74 yen, near its highest level in two weeks.
Japan Finance Minister Jun Azumi said the exchange rate remained out of sync with economic reality and repeating he was ready to counter excessive speculation.
The risk sensitive Australian dollar was down one percent for the day at $1.0689 after a dovish RBA quarterly statement.
Data showing a slump in Chinese imports also hurt the Aussie but it was set to remain underpinned on dips.
"We see risk of potentially strong pullbacks on a 3-month view given risk that the euro zone crisis could undermine risk appetite, but would view these as AUD/USD buying opportunities," said Rabobank in a note.
